A statutory audit report says the auditor is reasonably assured that the financial statements are free from material misstatement. Which feature of the audit explains why the auditor cannot give absolute assurance?
Answer and explanation
Correct answer: D. The auditor samples and relies on persuasive, not conclusive, evidence
- Step 1: Think about inherent limitations of an audit.
- Step 2: Auditors rarely examine all items and rely on sampling and judgement, so evidence is persuasive, not conclusive.
Answer
The auditor samples and relies on persuasive, not conclusive, evidence.
Why not the others: Auditors have a right of access to the company's records. Auditors must corroborate explanations and apply professional scepticism. There is no fixed amount threshold; materiality is judged by size and nature.
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